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How to Create a Marketing Budget From Scratch

By Eric Siu

When creating a marketing budget, you have to look at it in two ways: there’s a short-term budget and then there’s a long-term budget.

Now, what is short-term and what is long-term? That’s something you also have to distinguish.

What One-off Costs to Budget For

For example, SEO is a really front-loaded cost. I know many people say you always have to do SEO without stopping or else you lose your rankings. Guess how much SEO I do? Little to none.

Instead, you want to focus on building leads. You want to do a lot of manual outreach. You want to crank out more content. Content marketing is an ongoing cost.

But with SEO, most of it is outreach and link building. The on-page optimization is really easy. Every once in awhile, you may do a refresh or check up on it. Because it takes SEO a long time to kick in, we front-load the cost and try to spend all the money we need to get the job done right the first time. Then the rest of the budget we plan out into monthly phases.

What to Budget for Monthly

You can do anything related to ad buys on a monthly basis (social media for example, if it’s related to ad buys). When it comes to things like social media fan building, though, I front-load that.

I try to get as many fans as quickly as possible because I know the cost of social media advertising will go up over time. So why not spend the money as quick as possible and get the fans that you can keep tapping into and leveraging over time?

For the ROI, you just have to look and if it’s cash-flow-positive, you spend as much as you can. You don’t ever plan that out on a budget. I think it’s foolish when people do. If you spend $100,000 and you make $200,000—why would you limit yourself? Might as well spend half a million and make $1 million, right?

Double Down on What Works

Often times, I have people reaching out to me saying, “Hey, we have this $5,000 test budget.” That’s not exactly how it works when it comes to advertising because if you have something that’s working, you’re going to go all in. You want to double down on what works.

It’s more than arbitrarily stopping at $5,000. Just keep that in mind—if your company is setting these arbitrary $5,000 budgets, where is it coming out of? It’s probably coming out of a really random place rather than actual solid strategy.

In some cases, if you’re just starting out at ground zero, your marketing budget might be 15% of your revenues. That’s kind of the baseline of where you might start at. Keep in mind, though, that this is going to flip. Once you start to see something working, you want to go all in on it.

I wouldn’t recommend trying multiple initiatives at once, though. You might want to start with maybe one, two or three things based on how big your budget is, and then once you see something working, zero in on that one thing. When you’re starting out, you don’t have unlimited budget so you want to focus on what’s working. Really refine it and make a reliable marketing machine, then move into other areas.

Always keep an open mind. As a marketer, know and accept that budgets can be very malleable. At the end of the day, I’m really looking for a return and trying to track everything down to the wire. You should probably be using some type of reporting or dashboards or even Excel to track how your numbers are doing every day. Make sure you’re on top of it.

Don’t Build an Artificial Budget

Let’s recap by breaking down the different types of marketing and how we budget them:

SEO: front-load the cost

Social media fan building: front-load

Advertising: as long as it’s cash flow positive, we spend as much money as possible because we know that we’re making it back

CRO: we don’t spend anything until we’re getting at least a few hundred leads or conversions per month

Content marketing: Content marketing, as well as link building and ads, is often recurring monthly costs

Let’s say you’re spending $10,000 on link building. You probably need to be spending at least half of that on content as well. You need to have content out there to build links in the content and also to other pages on the website, but the content itself is something that will keep on going.

Either that, or have a set rate. I don’t think you can do content marketing right unless you’re willing to spend at least $10,000 per month. If you have the skills yourself, then you don’t need to spend much money at all, but most people will have to.

Some line items to keep in mind are setting up a budget for guest posting for writers or anyone who helps you handle the process. We spend about $2,500 a month as an agency, all on marketing tools. Every couple of months, we review and make sure we’re only using the tools that are essential to us, and believe it or not, everything that we have now we actually need and use quite a bit. If you’re just starting out, I’d say budget around the range of $500.

Let’s get even a little more granular for advertising. Digital Marketer has a really good framework for breaking this down in terms of traffic buckets:

Cold traffic: people who don’t know who you are

Warm traffic: people who’ve heard of you and maybe are on your email list

Hot traffic: people who have purchased from you already

Ideally, you want to allocate perhaps 60% of the budget to cold traffic, 20% to warm, and then 20% to the hot traffic to try and upsell them and ascend them up the funnel.

If you follow the rules we have suggested with your marketing budget overall, you won’t lose too much money and that’s they key when you’re starting off. You don’t want to just dump in too much cash and scramble and panic when you don’t make anything.

Also, remember to be patient! A lot of these strategies like SEO and content marketing can take six months to a year to see some results.

This post was adapted from Marketing School, a 10-minute daily podcast in which Neil Patel and Eric Siu teach you real-life marketing strategies and tactics from their own experience to help you find success in any marketing capacity. Listen to the podcast version of this post below:

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Eric Siu is the CEO of digital marketing agency Single Grain, which has helped venture-backed startups and Fortune 500 companies grow their revenues. He's also the founder of the marketing podcast, Growth Everywhere.

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